U.S. markets held positive throughout Wednesday’s session following another round of optimism on the U.S.-China trade standoff. U.S.

Treasury Secretary Mnuchin said analysts were about 90% of the way there on a deal and he believes there is a path to complete get it done.

Of course, this was old news but recycled as the market settled mostly lower with Tech bucking the trend.

Volatility stayed slightly elevated after failing to hold near-term support and remains a key signal going forward in determining how next week might shakeout.

The Russell 2000 dipped 0.2% following the opening pop to 1,530.

Previous resistance from mid-month at 1,535-1,550 and was challenged but held on the 2nd-straight close below the 200-day moving average.

The S&P 500 slipped 0.1% despite tapping a intraday high of 2,932.

Prior resistance at 2,925-2,950 was cleared but held with a close above the latter being a more bullish development.

The Dow gave back 11 points, or 0.04% following the opening trip to 26,660.

Near-term and lower resistance at 26,500-26,750 was cleared and held with a close above the latter keeping 27,000 and the all-time high at 26,951 in play.

The Nasdaq was up 0.3% after testing a morning high of 7,974.

Current and lower resistance at 8,000-8,100 held on the close back above the 7,900 level.

Energy and Technology were the strongest sectors after jumping 1.5% and 1.1%, respectively.

Utilities paced sector weakness after tanking 2.2% while Real Estate and Consumer Staples were lower by 1.9% and 1.4%, respectively.

Global Economy – European markets finished mostly lower as stock exchanges prepare to delist over 250 Swiss companies, by this upcoming Monday, if no resolution is reached over Switzerland’s bilateral agreements with the EU.

France’s CAC 40 and the Stoxx 600 fell 0.3%. UK’s FTSE 100 slipped 0.1% while the Belgium20 was off a point, or 0.03%. Germany’s DAX 30 added 0.1%.

Asian markets closed mixed as trade talks between the U.S. and China at the upcoming G-20 summit remain in focus.

Japan’s Nikkei fell 0.5% and Australia’s S&P/ASX 200 was lower by 0.3%.

China’s Shanghai declined 0.2% while Hong Kong’s Hang Seng edged up 0.1%. South Korea’s Kospi dipped a fifth-point, or 0.01%.

MBA Mortgage Applications rebounded 1.3% after falling 3.4% the prior week. All of the strength was in the refinancing component, which climbed 3.2%.

The purchase index declined 0.9%.

The 30-year fixed rate fell to 4.06% from 4.14% and the 5-year ARM rose to 3.50% from 3.45%. Refis were 51.5% of loan, compared to 50.2% previously.

Durable Goods Orders declined another 1.3% in May, missing expectations for a flat reading, and follows April’s -2.8% pullback.

Weakness was in transportation orders, which dropped 4.6% following the prior 7.6% plunge.

Excluding transportation, orders rebounded 0.3% from -0.1%.

Non-defense capital goods orders excluding aircraft edged up 0.4% from -1.0%. Shipments increased 0.4% from -1.6%. Non-defense capital goods shipments ex-aircraft rose 0.7% from a 0.4% gain.

Inventories increased 0.5% from 0.4% while the inventory-shipment ratio was steady at 1.67.

International Trade in Goods deficit widened to -$74.5 billion in May, missing estimates of -$71.5 billion.

Goods imports increased 3.7% to $214.7 billion, with exports up 3% to $140.2 billion.

Advance Retail Inventories for May increased 0.4%, matching forecasts, after a 0.6% increase the prior month.

Wholesale Inventories were up 0.4%, also matching expectations, and follows the 0.9% gain for April.

State Street Investor Confidence for June checked in at 87.6.

Market Sentiment- The iShares 20+ Year Treasury Bond ETF (TLT) closed in the red for just the 2nd time in 12 sessions after testing a low of $131.88. Prior and upper support at $132-$131.50 was breached and failed to hold.

A close below the latter opens up risk towards $130.50-$130.

Lowered resistance is at $132.50-$133.

Market Analysis – The S&P 400 Mid Cap Index ($MID) extended its losing streak to 4-straight sessions after closing on its session low of 1,898.

Near-term support is at 1,875-1,850 following the close back below the 1,900 level and 2nd-straight close below the 50-day moving average.

A move below the 1,850 level would be a bearish development with risk towards 1,825-1,800 and late May lows.

Near-term and lowered resistance is at 1,925 with continued close above 1,950 being a more bullish development and signaling a possible near-term bottom.

RSI has leveled out with resistance at 50-55. A move above double-nickels would signal additional strength with upside potential towards 60-65 and the latter representing the April highs.

Support is at 45 with a move below this level signaling additional weakness.

The Spiders S&P Homebuilders ETF (XHB) snapped a 3-session slide by a dime after bouncing to an intraday high of $40.75. Near-term and lower resistance at $40.50-$41 was cleared and held.

Continued closes above the latter would be a bullish signal for a retest towards $41.50-$42 with the 52-week peak from earlier this month at $41.84. October 2017 resistance is in the $42-$42.50 area.

Current support is at $40.25-$39.75.

A close below the latter and the 50-day moving average would be a bearish signal for additional weakness towards the $39 and the prior breakout level from earlier this month.

RSI has been holding support at 50 and represents prior resistance throughout much of May.

A close below this level would signal additional weakness towards 45-40. Resistance is at 55-60.

We are allocating the portfolio as follows:

30% in CERN closed on Wednesday at 71.05
30% in HAS closed on Wednesday at 105.41
30% in TTWO closed on Wednesday at 111.78
10% in TMF closed on Wednesday at 24.51

Option Traders – the following (regular monthly) options meet our criteria:

CERN20SEP $72.5 Strike Price CALL
HAS 18OCT $110 Strike Price CALL
TTWO 20SEP $115 Strike Price CALL
TMF15NOV $25 Strike Price CALL

All the best,
Roger Scott.